Health Insurance Reforms Inadequate So Far

Brief Overview of the ACA

Insurance Company Reforms - The ACA contains several consumer protections that are well-supported by the public:

Abolishing annual and lifetime caps on benefits paid

End to rescission (dropping people from insurance when they get sick), except in cases of fraud

Ending exclusions for pre-existing conditions.

Ending price discrimination based on gender and medical history

Allowing children to stay on their parent’s insurance until age 26

Eliminating the Medicare “donut hole” (the coverage gap in prescription drug coverage) over time

Establishing a minimum medical loss ratio - the percentage of premium that must be spent on health care rather than on administration or profit.

Individual Mandate - Everyone must have health insurance or pay a penalty.

Expansion of Medicaid - People with income up to 133% of the federal poverty line will be eligible for Medicaid, including childless adults.

Creation of Health Insurance Exchanges - States are required to set up a marketplace for individuals and small businesses to purchase insurance, thus improving the market clout of small purchasers.

Subsidies for the Purchase of Insurance - Premium and cost-sharing subsidies are available, at graduated rates, for people who earn up to 400% of the federal poverty line. The ACA also institutes small business tax credits for employers with 25 or fewer employees.

Cost Containment and Payment Reform Pilot Projects in Medicare - The ACA sets up several pilot projects in the Medicare program in an effort to control costs and reform health care delivery including an independent Payment Advisory Board, an Innovation Center, value-based-purchasing, and promotion of accountable care organizations.

Waiver for State Innovation - The ACA contains a pathway to a unified system such as the one being modeled for this report. Even if the ACA is fully implemented, about 262,000 Minnesotans may still be uninsured. It will fall far short of needed cost containment targets and will establish underinsurance—inadequate or expensive coverage—as the norm. States can and must continue to be laboratories for reform.

Insurance Does Not Assure Access to Care

Reforms in the United States have focused on increasing access to health insurance, but insurance is not health care. Our increasing reliance on high deductible plans or other forms of cost shifting through coinsurance and copays has significantly increased the rates of underinsurance, typically defined as medical costs exceeding 10% of income. Thirty-two percent of working age adults in the United States spent 10% or more of their income on health care in 2010; up from 21% in 2001. Forty percent of working-age adults report problems with medical debt. One third of adults in the country report self-rationing care because of cost: skipping tests, treatment or follow-up; not filling prescriptions or skipping doses; or not seeing a doctor when they had a medical problem. Sixty-two percent of personal bankruptcies are due to medical expenses, with 77% of those filing having had insurance at the onset of illness.

High Deductible “Consumer Directed” Health Plans Growing

Marketed as consumer directed, these plans shift cost and risk from insurers and employers to patients. They offer lower premiums in exchange for significantly higher deductibles. The plans are paired with a health savings account (HSA), a means of saving pretax dollars for health care expenses. Enrollment in high-deductible health plans (HDHPs) is increasing and expected to sharply rise over the next decade. Minnesota currently leads the nation in percentage of people enrolled in HDHPs at 14.9%.

The growth in these plans is leading to predictable negative outcomes: financial barriers to care and adverse selection. Fifty-seven percent of low-income families and 42% of high-income families with HDHPs report delaying or skipping needed health care due to cost. On the flipside, the relatively healthy, with few expected medical costs, opt for the enticing lower premiums, leaving traditional insurance plans with a pool of sicker people which causes insurance premiums to go up, leading more healthy people to flee these plans.

Replacing Medicare with Premium Support Would Magnify the Problem

Many in Congress are suggesting that the way to control Medicare spending is by moving away from a defined benefit to a defined contribution plan by offering seniors a subsidy, or voucher, to purchase insurance on the private market. While this privatization design could save taxpayers money, since the proposed subsidies would not keep up with health care inflation, it would do so by shifting costs to seniors. The Congressional Budget Office suggests that this could cost seniors several thousand dollars out of pocket for benefits similar to those currently paid under Medicare. This would spread the phenomenon of underinsurance to seniors.